- Fabio Fois, an economist at Barclays
The Euro zone inflation unexpectedly eased in August, reinforcing the view the European Central Bank will expand its bond-buying programme to deal with economic risks associated with weak prices. The annual rate of inflation fell to 0.1% in August from 0.2% July. Meanwhile, the core measure, which strips out alcohol, tobacco, food and energy, climbed 0.9% in the reported month, after the 1.0% increase seen in July. On a monthly basis, consumer prices in the 19-country bloc posted zero growth, recovering from the 0.6% decline seen previously.
Lower oil prices prompted the ECB earlier in September to revise downwards its inflation outlook. The central bank predicted a gradual increase in inflation to 1.7% in 2017 from 0.1% this year. The ECB has already indicated that it is prepared to expand its bond-buying program beyond September 2016. Such a move could become necessary if inflation does not return to the ECB's medium-term target. Meanwhile, the Organization for Economic Cooperation and Development raised its 2015 economic growth forecast for the Euro zone by 0.1 percentage point to 1.6%, but cut its 2016 forecast to 1.9% from 2.1% in June.
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